Savings Accounts vs. Certificate of Deposit
Savings Accounts vs. Certificate of Deposit

Certificate of Deposit or CD and savings accounts are all very popular among customers of banking services. These products allow a certain amount of money to be saved while at the same time earning return in the form of interest. Which one is better? The answer highly depends on your needs and long-term goals. To help you pick the right savings vehicle to use, we are going to discuss some of the basics and benefits of savings account compared to Certificate of Deposit. A Certificate of Deposit allows you to store a predetermined amount of money over a predetermined amount of time. You cannot make deposits or withdrawals once the certificate is issued unless it matures; some banks allow you to make early withdrawals, but you will also have to pay a relatively high penalty. A savings account, on the other hand, offers the flexibility you would expect from a bank account. You can deposit and withdraw your money anytime you need to while at the same time enjoy several other banking facilities. However, the interest rate offered as part of the Certificate of Deposit deal is always higher than that of a savings account. This is because the bank can plan how to use your money better over the given period, which means they will also be generating better returns. With savings accounts, the interest rate is often limited as the cost of its flexibility. As you can see, the best type of savings vehicle to use depends highly on your needs and wants. If you need the savings to be as liquid as possible, a good savings account is the better option; you can use the passbook of your bank account to make withdrawals. If a higher return is what you are after, then certificate of deposit is the better option to look into.

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